Given recent world events and all the talk about the recession, job losses and other economic doom and gloom, it would be understandable if Canadian real estate agents feel a little down as they head into the holiday season. But the chief economist for the country's federal housing agency says there's no reason for long faces in the residential real estate industry.

More existing homes were sold in Canada in 2001 than ever before, and although the forecast for 2002 isn't quite as rosy, it will still be the second-best year ever, says Michel Laurence, chief economist at Canada Mortgage and Housing Corp. (CMHC). "There's no doom and gloom in the forecast," Laurence told a sold-out conference in Toronto recently. "The housing market is in a positive mode, despite the rest of the economy."

Mortgage rates are considered the number one reason why the resale market remains strong. Rates continue at the lowest level in memory, and Laurence predicts, "Since there's no risk of inflation, everything points to low mortgage rates remaining for the next several months."

Although there have been job losses in central Canada, Laurence says the market is still benefiting from several previous years of job growth. "People take their time before jumping into the market," he says.

Similarly, strong immigration numbers from previous years are helping the housing market today. "It takes about 10 years for immigrants to go from renters to buyers," Laurence says. Immigration hit record numbers in 1992 and 1993, and was also strong in 2001. Tighter requirements are expected to lower the number of immigrants next year, but fewer people are also expected to emigrate to the United States.

The percentage of sales to new listings is at an all-time high across the country, says Laurence. It's considered a sellers' market when that percentage rises above 40 per cent, and it's currently at about 65 per cent. The new home market is also at a record low for unoccupied inventories.

Not surprisingly, rental apartment vacancy rates across the country are near a record low.

The average MLS selling price is climbing, from $164,135 in 2000, to a forecast of $172,500 in 2001, to $177,800 in 2002.

CMHC also sees renovation spending rising to record levels in 2002, as a result of all the recent purchases. "Even if there's a decline in the resale market next year, renovation spending will increase in the next two or three years," says Laurence. "We're also seeing anecdotal evidence that, considering the decline in the tourism and travel industries, more people are going to put their money into their mortgages and renovations."

Those who think the industry may be headed for a "housing meltdown" like the market saw in 1990 and 1991 should be reassured by several factors that are different this time around, says Laurence. He says a lack of consumer confidence lead the recession in 1991, prompted by massive job losses.

"Consumer confidence is much stronger now," says Laurence. CMHC's most recent survey of consumer intentions to buy or renovate a home was taken during the time just before and just after September 11, but the results show that the attacks did not affect consumer intentions, he says. Consumer confidence may decline in 2002 because of reduced job prospects, but it has a lot of resilience and is still at a historically high level.

Some other big differences between the market now and before the last recession:

• The five-year mortgage rate was at 13.4 per cent (adjusted for inflation) compared to 7.3 per cent now.

• Job growth was lower and unemployment higher than now.

• Immigration is higher now.

• The sales-to-listing ratio then was 33 per cent; now it's about 65 per cent.

• The rental vacancy rate then was 3.3 per cent; now it's 1.3 per cent.

• The growth in disposable income then was 0.9 per cent; now it's 2.2 per cent.

CMHC says there will be a record 364,500 MLS sales in 2001, compared to 333,197 in 2000. The forecast for 2002 is 357,100 sales.

For more articles by Jim Adair, please press here.

Published: December 6, 2001

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Jim Adair is editor of REM: Canada's Real Estate Magazine, a business publication for real estate agents and brokers. He has been writing about Canadian real estate, home building and renovation issues for more than 30 years. You can contact Jim at .